Taxpayers allege and the department admits that,
historically, standing timber was included in the definition of
real property and taxed as such. In 1961, the legislature
enacted a severance tax in lieu of an ad valorem property tax on timber in eastern Oregon. Or Laws 1961, ch 627, § 3. In
1977, the legislature enacted a law providing similar treatment
for timber in western Oregon. Or Laws 1977, ch 892, § 4. In
November 1990, the people of Oregon adopted Measure 5, adding
section 11b to Article XI of the Oregon Constitution. That
section imposes a dollar limitation on property taxation.

In response to an attorney general's opinion that both
the eastern and the western Oregon severance tax came within
section 11b, the 1991 legislature suspended those tax laws and
enacted a privilege tax in their places. Or Laws 1991, ch 459,
§§ 276, 277, 300. In 1993, the legislature repealed the
severance taxes and replaced them with the current WOPT and the
similar Eastern Oregon Privilege Tax (EOPT). Or Laws 1993, ch 801, §§ 6, 27.

Taxpayers' Complaints set forth six separate claims,
all of which raise only legal issues.

ISSUE NO. 1

Is the harvesting of timber from land in western Oregon
that is neither classified nor designated as forestland (land on
which taxpayer has paid ad valorem property taxes on 100 percent
of its real market value) subject to the WOPT?

ANALYSIS

ORS 321.272 provides:

"* * * (1) Effective January 1, 1994:

"(a) All timber in western Oregon shall be exempt
from ad valorem taxation.

"(b) For the privilege of harvesting timber from
privately owned land in western Oregon a tax is imposed
as provided in ORS 321.257 to 321.322.

"(c) The tax imposed by paragraph (b) of this
subsection is intended to recover the annuitized value of
forgone property taxes on forestland.

"(2) Effective July 1, 1994, all forestland in
western Oregon shall be assessed and taxed and the value
determined under ORS 308.205, 308.232, 321.348, 321.352,
321.353 and 321.357." (Emphasis added.)

The clear language of paragraph (b) imposes a tax on
timber harvested from taxpayers' lands. Taxpayers contend that
paragraph (b) should read "privately owned forestland."
Taxpayers' argument rests on ORS 321.272, which describes one
purpose of the privilege tax in terms of recovering foregone
property taxes from "forestland." Taxpayers' lands are not
"forestlands" and, because they pay ad valorem property taxes on
the full value, there are no "foregone taxes."

While the imposition of the tax is clear, the error, if
there is one, is not. It is clear that there are no foregone
property taxes on taxpayers' lands. However, did the legislature
intend to exempt timber harvested from such lands? The
legislature has provided no express exemption or specific language addressing this question. There is no definition of
"privately owned land" and none is needed.

The legislature has defined "forestland" as follows:

"'Forestland' means land in western Oregon (a) which
is being held or used for the predominant purpose of
growing and harvesting trees of a marketable species and
has been designated as forestland or (b) the highest and
best use of which is the growing and harvesting of such
trees." ORS 321.257(3).

1. To come within the definition of part (a), forestland
must be "designated." To obtain designation, an owner must make
written application to the county assessor. ORS 321.358. The
assessor will not designate land as forestland unless it is held
or used for the predominant purpose of growing and harvesting
trees of a marketable species. Unless that qualifying condition
is met, such land is not forestland even though it is growing
trees of a marketable species. Similarly, under part (b) of the
definition, there can be land in western Oregon growing trees of
a marketable species, even though some other use may actually be
the highest and best use. In both instances, where the land does
not qualify under the definitions contained in ORS 321.257(3),
the harvesting of timber from such lands will create a liability
under the WOPT.

"* * * For the privilege of harvesting timber from
privately owned land in western Oregon * * *." (Emphasis
added.)

The three subsections that follow subsection (1) set forth three
different tax rates for three different time periods. In each
case, the statute specifically indicates that the tax is imposed
on the stumpage value of timber harvested from "privately owned
land." In contrast, subsection (3) indicates that if timber is
harvested from "land designated as reforestation land," the
privilege tax will be paid at yet a different rate. Based on the language of this section alone, it is not reasonable to believe
that the legislature made a mistake in ORS 321.272.

What the legislature may have intended with regard to
non-forestland and fully taxed land growing trees of a marketable
species in western Oregon is not clear. It may be that the
statutory scheme was designed to motivate timberland owners to
seek designation. Whatever the intent, if any, the legislature
did not exclude or exempt such lands from the WOPT. The words
are clear, and applying the statute as written does not produce an absurd result. Therefore, the court must conclude that the
statute applies to taxpayers.

Taxpayers ignore the fact that the WOPT Act does more
than impose a tax on harvesting timber. It also exempts all
timber in western Oregon from ad valorem property taxation and
provides for special assessment of forestland at 20 percent of
its statutorily determined value. This comprehensive approach is
intended to motivate landowners to let their timber grow until it
is ready to harvest. Although taxpayers here pay ad valorem
property tax on the full value of their lands under the Act, no
penalty is imposed when the land is used for something other than
the growing and harvesting of trees.

The use of the word "land" by the legislature appears
intentional. ORS 321.273, setting forth the rates of tax, uses
the word "land" six times and never uses the word "forestland."
Therefore, the court concludes that timber harvested in western
Oregon from privately owned land, whether forestland or not, is
subject to the WOPT.

ISSUE NO. 2

Is the WOPT on the harvesting of timber a tax on
property within the meaning of section 11b, Article XI of the
Oregon Constitution?

"* * * [A]ny charge imposed by a governmental unit upon
property or upon a property owner as a direct consequence
of ownership of that property except incurred charges and
assessments for local improvements."

Taxpayers' view is too narrow. As noted above, the
statute does more than impose a privilege tax. Consequently, the
"exemptions" set forth in ORS 321.267 are not just from the
privilege tax, but from the entire statutory scheme. Therefore,
the scope of the exemptions cannot be viewed as indicating the
nature of the tax.

Taxpayers contend that the tax is imposed on property
or the owner of property within the meaning of section 11b. ORS 321.257(4) imposes liability for the tax on the person who
owns the severed timber at "the point at which timber that has
been cut * * * is first measured in the ordinary course of
business." However, ownership is merely the means of identifying
the party most likely to be responsible for the harvesting of
timber. It is not the existence of property or the ownership of
property that triggers the tax. In the absence of the act of
harvesting, no tax is imposed. It should be noted that
harvesting timber involves more than just felling trees. It also
includes delimbing, bucking, scaling, and retrieval from the
forest. The tax imposed takes these actions into account by
consideration of the differing logging costs and the "net
stumpage recovery." ORS 321.282.

2. The law assumes that the owner of the harvested timber,
at the point specified, controlled the exercise of the privilege
and, therefore, is made liable for the tax. That is a reasonable
assumption. In short, "the practical operation of the statute"
is to tax the privilege. Redfield et al v. Fisher et al, 135 Or
180, 206, 292 P 813, 295 P 461 (1931). The distinction between
ownership of property and use of property was the basis for
upholding a privilege tax on the display of amusement devices.
See Fox v. Galloway, 174 Or 339, 350, 148 P2d 922 (1944). The
privilege tax imposed for the display of amusement devices is not a tax on property within the meaning of section 11b. Alien
Enterprises, Inc. v. Dept. of Rev., 12 OTR 126 (1992).

ISSUE NO. 3

Do the WOPT and the EOPT violate Article IX, section 1
of the Oregon Constitution?

ANALYSIS

Article IX, section 1 of the Oregon Constitution
provides:

"* * * The Legislative Assembly shall, and the people
through the initiative may, provide by law uniform rules
of assessment and taxation. All taxes shall be levied
and collected under general laws operating uniformly
throughout the State."

Taxpayers claim that the WOPT and the EOPT are not
general laws operating "uniformly throughout the State." There
is an obvious disparity in the rates of tax imposed on the
harvesting of timber in eastern Oregon and in western Oregon.
Taxpayers contend that a state tax law must apply to the entire
state.

3, 4. This contention was long ago rejected in State ex rel.
v. Malheur County Court, 185 Or 392, 203 P2d 307 (1949). In that
case, noting that the uniformity requirements of Article I, section 32 and Article IX, section 1 of the Oregon Constitution
"are to be read together," the court stated:

"* * * [I]f a tax is equal and uniform throughout the
taxing district, there is no violation of the
constitutional mandate." Id. at 411.

The legislature can impose a tax statewide or it can impose a tax
within a single district. In Jarvill v. City of Euguene, 289 Or
157, 613 P2d 1 (1980), the city adopted ordinances imposing taxes
on a downtown district. Taxpayers in that case contended that
Article I, section 32 prohibited creating a territory smaller
than the city for taxation. The court held:

"* * * [W]e conclude that a classification based on or
defined by geographical location is nevertheless
constitutionally permissible if it is also based upon
qualitative differences that distinguish the geographical
area from other areas within the territorial limits of
the authority levying the tax." Id. at 180.

ISSUE NO. 4

Are the WOPT and the EOPT "local laws" for assessment
and collection of taxation in violation of Article IV, section 23, paragraph 10 of the Oregon Constitution?

ANALYSIS

5, 6. Taxpayers contend that the WOPT is applicable only to
the western half of the state but imposes taxes that are paid to
the state in violation of Article IV, section 23 of the Oregon
Constitution. However, both the WOPT and the EOPT are imposed by
one law enacted by the legislature to comprehensively address the
taxation of timber throughout the state. See generally Or Laws
1993, ch 801. The statute applies to the entire state. The division between the east and the west is one of classification,
not localization.

Also, the privilege taxes imposed are not in conflict
with other taxes imposed on timber. As the court stated in Simon
v. Northup:

"* * * The evident purpose of [Article IV, section 23,
paragraph 10] was to prohibit the legislature from
passing a special or local law providing a mode or manner
for the assessment and collection of taxes * * * which
would interfere with or contravene the method of
assessing and collecting taxes as provided by the general
law * * *." 27 Or 487, 500-501, 40 P 560 (1895).

Article IV, section 23, paragraph 10 of the Oregon
Constitution may also have the purpose of preventing the
legislature from enacting laws, the effect of which would compel
the citizens of one public corporation to pay the debts and
obligations of another. Yamhill County v. Foster, 53 Or 124, 99
P 286 (1909). That is not the case here. All of the WOPT taxes
collected in excess of administrative costs are credited to
accounts of local taxing districts, which suffered diminished
property tax revenues. ORS 321.307. The collected taxes are
then used to offset the tax levies of the districts, thereby
benefitting the area from which the taxes are raised.

ORS 321.312. The court concludes that the statute is not a local
law in violation of Article IV, section 23 of the Oregon
Constitution.

ISSUES NO. 5 and 6

Taxpayers' fifth claim (violation of Article I, section
32 of the Oregon Constitution), and sixth claim (violation of the
Fourteenth Amendment to the United States Constitution), commonly
assert that the WOPT classification is fundamentally defective.

"* * * [P]laces no restraint upon the power of the
legislature in the matter of taxation which was not
already enforced upon it by the 14th Amendment to the
federal Constitution, with this qualification, if it be
a qualification, that among the members or objects
included in a class selected by the legislature, inherent
uniformity as well as territorial uniformity is
required." 112 Or 314, 335-36, 228 P 812 (1924).

Therefore, taxpayers' fifth and sixth claims may be considered
together.

8. Taxpayers acknowledge "that the legislature has noted
that there are qualitative differences between the forests east
and west of the summit of the Cascades." (Ptfs' Memo at 20.)
Taxpayers argue that differences in forests are not a basis for a
difference in the rate of tax for the privilege of harvesting
timber. This is a specious argument. The purpose of making a
distinction between eastern and western forest is to treat them
differently. While the classification must have a reasonable
relationship to the legislative purpose, there can be no doubt
that the purposes set forth in ORS 321.262 justify different tax
rates. Huckaba v. Johnson, 281 Or 23, 26, 573 P2d 305 (1978).
Neither the Fourteenth Amendment nor Article I, section 32 of the
Oregon Constitution prevents the legislature from imposing
different tax rates on different classes of property or
taxpayers. See Savage v. Munn, 317 Or 283, 856 P2d 298 (1993)
and Smith et al v. Columbia County et al 216 Or 662, 341 P2d 540
(1959).

The legislature has determined that:

"* * * That portion of our state lying east of the summit
of the Cascade Mountains differs greatly in forest tree
types, soils, climate, growing conditions and topography
from western Oregon." ORS 321.410(5).

Based on this determination, the legislature created a
classification based upon geographical characteristics. To
accomplish its legislative purposes as set out in ORS 321.262 and
ORS 321.408, the legislature has imposed different conditions and different rates of tax. Those taxes are imposed on a uniform
basis throughout each territory so classified. See Jarvill, 289
Or at 183-84. Now, therefore,

IT IS ORDERED that Plaintiffs' Motion for Partial
Summary Judgment is denied, and

IT IS FURTHER ORDERED that Defendant's Cross-Motion for
Summary Judgment is granted. Costs to neither party.

3. ORS 305.580 specifies that ORS 305.583, 305.585, 305.587,
and 305.589 "provide the exclusive remedy" for determining the
effect of the limits of section 11b on taxes. For taxes imposed
by the state, the petition must be filed in the Oregon Tax Court
within 60 days of when the tax is due as provided by statute.
ORS 305.583(7). Taxpayer Irwin harvested timber between May 7,
1997, and May 30, 1997. He timely paid the tax thereon. Under
ORS 321.287, that tax would have been due January 31, 1998.
Taxpayer filed his Complaint with this court March 30, 1998,
within the 60-day limit provided by statute.